July 29, 2006
Hedge Funds: See Saw Industry
Back in 2003, this was a US $500 billion industry and in just three years, we are talking in trillions. Now, here are a few statistics I have managed to get off the web. They’ll show you how big hedge funds have become today.
- On an average day, between 18 and 22 percent of all trading on the New York Stock Exchange is hedge fund related.
- And between 30 to 35 percent of all trading on the London Stock Exchange is hedge fund related.
Something isn’t it? But that doesn’t mean there are no downfalls. This industry is famed for its enormous losses as much as it is for its legendary gains. Recently, the Ohio Bureau of Worker's Compensation lost $215 million in a hedge fund that only invested in U.S. Treasury securities! And the worst part: the Bureau of Worker's Compensation had only invested a total of $225 million in the fund in the first place, so their loss was to the tune of 95 percent of their total investment!
But such is life in the fast lane of the world's financial markets. You can always expect the unexpected. Things have occurred in the financial markets that nobody could have ever anticipated, but managed to happen anyway. Ultimately, the markets always have a way of showing even the best and the brightest that they are nowhere as smart as they sometimes think they are. However, the best thing about this industry is that you can never be bored with hedge funds. That’s because you are always anticipating something to occur and not knowing if it will happen or if things will take a turn for the unexpected.
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